Timmy Plc Is Making a Bonus Issue of 2 New

question 7

Multiple Choice

Timmy Plc is making a bonus issue of 2 new ordinary shares for every 5 already held. The shares have a par value of 5 pence. Timmy plc currently has 500,000,000 ordinary shares in issue. What is the correct double entry required to record this transaction in the company's books of account?

• A) Debit share capital £10,000,000
• B) Debit retained earnings £10,000,000
• C) Debit share capital £200,000,000
• D) Debit retained earnings £200,000,000

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Definitions:

Time Value of Money Concept

The principle that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

Capital Investment Analysis

The process of evaluating and comparing potential investments or projects based on their expected returns and risks to choose the most beneficial.

Sunk Costs

Sunk costs refer to money that has already been spent and cannot be recovered, a concept that emphasizes that such costs should not affect future business decisions.

Federal Income Tax Ramifications

The effects or consequences that adjustments in the federal income tax laws or rates have on an individual or business's financial situation.